10. Stock J has a beta of 1, an expected return of 15%. The equity risk premium is 10%, and the risk-free rate is 2.5%. Calculate Jensen's alpha measure for Stock J. (a) 2.5% (b)-2.5% (c) 0% (d) -7.5%
10. Stock J has a beta of 1, an expected return of 15%. The equity risk premium is 10%, and the risk-free rate is 2.5%. Calculate Jensen's alpha measure for Stock J. (a) 2.5% (b)-2.5% (c) 0% (d) -7.5%
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Expert Solution
Step 1
The formula for the Jensen's alpha measure is given by,
Jensen's alpha = r –[rf + β ×(rm–rf)]
Where,
r = Expected return,
rf = Risk-free rate,
(rm – rf) = Equity risk premium,
β = beta of stock.
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